As a fellow Gen Y investor, it’s fair to say that the 20-somethings have only ever known good times. But when it comes to property, our expectations may need to be adjusted.
BY LAUREN CROSS
For Gen X (the 30-somethings), life on the property ladder was great; there was constant growth and equity gains during the early 2000s. In fact it didn’t really matter where you bought – you were guaranteed to make money somewhere.
But something’s happened to Gen Y of late. We’re shopping online to save money, we’re Facebooking our friends instead of going for coffee with them and every time we turn on our iPod, someone’s on the radio declaring doom and gloom. The downright daring generation is becoming conservative, frozen in fear of what could happen next.
Even more scary is the thought that we’re paying interest on a property that’s showing no growth, or very little compared to what we expected.
It’s hard news to swallow, because Gen Y has always been an instant generation – we want the best job now, the best property now, the best holiday now and the best wardrobe now.
So what to do when our property doesn’t double in value every seven to 10 years like they promised? How do you deal with the frustration of not being able to sell and upgrade into that dream home you’ve always wanted, or use the equity for your next property?
The answer is something none of us really like to hear. Believe it or not, we must wait. Yes, actually wait. And I’m not talking a month or two. I’m talking a year or two.
Gen Y is learning the painful way that instant gratification has now turned into a new, unfamiliar and unspeakable word – patience.
Jan Somers of Somersoft Property has seen decades of property cycles and says
there’s one philosophy Gen Y needs and that’s to hold on.
“If you buy it to keep it, you’re keeping it for retirement,” Somers says.
“There’s always a temptation to sell in the down times because it’s not making money. There’s always temptation to sell in the growth times because you want to cash in. But if your philosophy is to keep the property for retirement, your ultimate aim is to live off the rent. Once you get into thinking ‘when should I buy, when should I sell’ then you’re a speculator, not an investor.”
Gen X also needs to wait, Somers says. Many Gen X investors probably made huge equity gains a few years back, but Somers warns don’t be fooled if you think you’ll never experience another property boom.
“People who’ve been through one boom think it can never happen again. Because they’ve only been through one boom and most of them are young, they’re not thinking long term. With investing, you have to look long term.”
South Australian TAFE property professor Peter Koulizos agrees, adding the current downturn won’t last long.
“Unemployment’s at a record low and we have inflation under control,” Koulizos says.
“Interest rates might go up a little but they might also go down. Don’t be surprised if we see them go down.”
In fact, Koulizos says he can’t see a reason why property prices are falling. He tells his TAFE students not to worry because it’s only bad press and perception that’s holding younger investors back.
“Consumer confidence is down and people’s perception is their reality,” Koulizos says.
“You should ask yourself, if you sell now and buy in a year’s time, what about all the buying and selling costs? It’s almost 10 per cent of the purchase price and if you’re looking at something for $300,000, you’ve just wasted $30,000 on agent fees and taxes.”
Tell us what you think. Are you a Gen Y or Gen X investor? What’s your property strategy?
Lauren Cross is a journalist/subeditor of Australian Property Investor magazine, www.apimagazine.com.au